Takeaway:Sanders and Clinton Set to Sit Down; Contrasts in Circumspection; Donald's Donor Deficiency

Editor's Note:Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please emailsales@hedgeye.com.

SANDERS CLINTON CONFAB

Hillary Clinton and Bernie Sanders are set to sit down and discuss Sander’s policy wish list, his campaign, and the upcoming convention in July. Sanders has yet to suspend his campaign and up to this point felt that the longer he holds out, the more leverage he has to push Clinton and the Democrats in his direction, but he’s getting perilously closer to overstaying his welcome.

Look for Sanders to push his mainstay ideas like wage inequality, free healthcare and free college tuition, and Wall Street reform, while Clinton looks to press for issues she hopes will end up unifying the party - like climate change, immigration, and foreign policy. With Donald Trump threatening to ban ethnic groups and cancel the Paris climate deal, look for Sanders and Clinton to rally and unite the party with their eye on the November prize being more than just the White House.

CONTRASTS IN CIRCUMSPECTION

In times of turmoil, true leaders emerge and have stood to both console and rally our nation. The tragic massacre in Orlando comes as the first big test of the 2016 general election. Trump is using the situation to double down on his sentiment towards Muslims, immigration and went on to tweet an I-told-you-so statement, calling for President Obama to resign.

In contrast, Clinton canceled her first dual campaign appearance with Obama, delivering more somber remarks and outlining her goals to combat terrorism. Candidates will ultimately differentiate and further distance themselves from their opponent in their response to situations of this magnitude - expect this to prevail throughout the election.

DONALD'S DONOR DEFICIENCY

The Trump camp may have lost more sorely-needed donors after high profile patrons made no bones about shutting their wallets at Mitt Romney’s annual conference. Donors were vocal in their concern with Trump’s lack of discipline and his demagoguery.

The summit, which brings together Romney’s extensive network of wealthy contributors, further serves as a reminder of the hurdles Trump faces in corralling the monied crowd. If he’s unable to mend the wounds, look for these dollars to go elsewhere – we hear Gary Johnson is looking for help.

Less Than Zero: German 10-Year Yields Go Negative (#GrowthSlowing Anyone?)

Takeaway:The German 10yr Bund yield went negative and hit new all-time lows at -0.0047% on global #GrowthSlowing fears.

Big news in bond markets today.

The 10yr German Bund yield went negative, hitting an all-time low, as investors flocked to sovereign bonds on global #GrowthSlowing fears. Take a look at the long-term chart of the yield on the German 10yr over the last 26 years.

A truly amazing rally.

The graphs below show the yield curves for select sovereign bonds today (green line) versus where they were at the beginning of the year (yellow line). As you can see, there's been a massive rally in long bonds around the world.

Chipotle Shares Have 35% Downside

In case you missed it, Hedgeye's Howard Penney captured the essence of the bearish case on Chipotle (CMG) in a recent New York Post article.

Since the E. coli outbreak was announced, Chipotle shareholders have taken a significant hit. The stock is down -34% since Penney added it as a Best Idea Short on 11/16/15 ... and over -18% year-to-date.

"By another measure, the number of diners who say they 'don’t like' Chipotle increased to 24 percent in the second quarter of 2016 — from 18 percent in the fourth quarter of 2015, according to a Civicscience brand survey released on Monday.

'There’s going to be a permanent group of people who won’t go back,' said Hedgeye’s Howard Penney. 'And even after three years, when Chipotle may see some improvement, their competition will have improved by then, too. They may have had their run.'"

To be clear, Penney has been the bear on CMG for a while now. (For more, click here and here.)

Where do we go from here?

Is the evolving trend #Deflation or #Reflation? That's the question of the month...

On an immediate-term trade basis, yesterday's selloff triggered oversold in a number of shorts in Real-Time Alerts. Here's additional insight via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today:

"U.S. Treasury 10yr yield at 1.57%. Yep. Closing in on 2015 lows but rates are oversold ahead of Yellen’s 4th pivot (hawkish to dovish to hawkish to dovish) in 6 months as #EmploymentSlowing becomes obvious."

Take a look at a chart of the tumbling 10yr Treasury yield. (Note: At the start of 2016, the 10yr Treasury yield was 2.25%.)

NPR ran a segment over the weekend saying Iran’s dramatic return to crude production and exports is “confounding the experts and beating expectations.” Well, not so much. Iran surprised virtually everyone but us.

As you can see below, Hedgeye Potomac Senior Energy Analyst Joe McMonigle predicted this in his January 17 note, “Iran sanctions relief to trigger crude exports sooner and larger than expectations.” In the note, he advised our subscribers to expect 700,000 barrels per day by March. Iran is now at 800,000 barrels per day and growing.

Here's what NPR had to say

“When the nuclear deal between Iran and world powers was implemented in January, it was widely believed it would take at least a year for the country’s oil industry to get back up to speed after years of sanctions. But Iran is confounding the experts and beating expectations.”

Here's what we wrote back in January

“The same analysts who were surprised at how quickly sanctions got lifted are now underestimating Iran’s production capabilities, or incorrectly believe Iran will move slowly due to low crude prices. Our view is that Iran will increase production by larger amounts and sooner than most observers think. We anticipate that Iran, by itself, has the capability to produce approximately 700,000 barrels a day of additional crude for export by March 2016.”

“As a result of sanctions, Iran reduced production across the board as opposed to shutting down major upstream fields. Therefore, increasing production in the short-term would be almost like pushing a button. Iran could easily reach 700,000 barrels a day by increasing production by a couple hundred barrels a day at its 2,280 producing wells.”

* * * * *

This is a big deal on an important call that we got right. We were virtually alone in making the call.

On a related note, our world-class cartoonist captured our contrarian call later that week on January 22 with this cartoon.

Daily Market Data Dump: Tuesday

Takeaway:A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products.

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